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Europe carbon price dives

Peter RyanUpdated
Wed Apr 17 08:56:00 EST 2013

European carbon prices fell by the most on record after the European parliament rejected emergency measures to make polluters pay more. The decision saw the carbon price fall by 45 per cent to around $AU3.30 per tonne. Australia has a fixed carbon price of $23 per tonne until 2015.

Transcript

TONY EASTLEY: The price of carbon in Europe has plunged after the European parliament rejected an emergency plan that would have forced companies to pay more for polluting.

European carbon permits fell as much as 45 per cent and German power prices for next year fell to their lowest level since 2007.

The rejection resonates here, given that Australia has a fixed carbon price of $23 a tonne.

I'm joined in the studio now by our business editor Peter Ryan.

Peter, good morning. Carbon is obviously a hot political issue. How significant is this "no" vote?

PETER RYAN: Well apart from highlighting Australia's very high fixed carbon price it has raised debate about whether emission trading schemes are the best way to handle climate change or to make carbon polluters pay.

The problem though for the EU scheme is that the eurozone debt crisis means slowing economic growth and less industrial output. That means less pollution and as a result companies have been buying fewer carbon permits and the prices have dived.

Today's proposal came from France. That was to reduce the supply of carbon permits as a way of pushing up the price.

Now that was overwhelming rejected and as a result the European carbon price has fallen to around $AU3.30 per tonne.

One man who voted in favour of the proposal is Chris Davies, a Liberal Democrat from Britain, and he says it's a dark day for the environment.

CHRIS DAVIES: This is a blow against all who want to see Europe leading in the fight against climate change. And it also represents us turning our back on our own industrial future because most of the big engineering companies recognise that we need to develop low carbon technologies.

In order to do that we have to put a price on carbon, create the right incentive. If there's no price, there's no incentive. We're not going to develop these new technologies. This decision today is really very bad news for our future.

TONY EASTLEY: A British member of the European parliament, Chris Davies.

Peter, the International Monetary Fund has just released its World Economic Outlook and once again the focus is on Europe.

PETER RYAN: Yes, that's right. The IMF has trimmed its global forecast from 3.6 per cent to 3.3 per cent in the fourth consecutive revision. But it says Europe is lagging behind the rest of the world and it sees the eurozone economy shrinking a third of 1 per cent with significant contractions in France, Spain and Italy.

So in a bit of an understatement the outlook remains "subdued" and the IMF's chief economist Olivier Blanchard says many developed economies are facing a lengthy and difficult recovery, despite recent good signs from elsewhere.

OLIVIER BLANCHARD: Recent good news about the US has come with renewed worries about the Europe area. Given the strong interconnections between countries, an uneven recovery is also a dangerous one.

In some ways the world economy is as weak as its weakest link. So while some tail risks have decreased, it is not time for policy makers to relax.

TONY EASTLEY: IMF chief economist Olivier Blanchard.

Peter, did Australia rank much of a mention in the IMF's outlook?

PETER RYAN: Well Tony, barely a mention given that Australia has been resilient in the face of very big global problems. We have low interest rates, low inflation and a relatively very low jobless rate of 5.6 per cent.

One point of interest though: The IMF thinks China's economy will push back above 8 per cent because of robust demand - good news for Australian iron ore exports. But that 8 per cent figure was before China's latest GDP came in it at just 7.7 per cent, which pushed global markets lower.

The IMF is now determining whether those actual Chinese growth figures- what they really mean.